Provision and Production without Markets: A Primer on Priority Theory of Value

Over the last century, popular and academic opinion has grown to strongly favor the use of markets in political systems. Communism is largely seen as a failure, and since there are only two possible ways to do having stuff, markets win by default. Over time, quite the pantheon of problem-solving properties have been built up around markets, what they can do, and what other systems can’t do. This has grown into the idea that markets are the only possible way to provision goods, which I call “market essentialism”. I argue that markets are not essential, and the properties that they are supposed to have can be deconstructed, improved upon, and integrated into a system without the considerable flaws of markets.

Many of the arguments of the market essentialist position are rooted in the old “economic calculation problem” debate from the early 20th century. Markets are supposed to solve an information problem, the measuring of consumer demand and conveyance of this measurement to suppliers. This idea has been expanded over time, and can now be stated simply as, “consumers direct production in a market”. Goods and services available in a market, therefore, represent exactly what consumers want, and the practices and associated effects with the production of these goods and services all have the stamp of approval of consumers.

However, consumers do not direct production in a market. Producers direct production, and target measured consumer demand after an initial guess. Markets simply provide a feedback mechanism which, according to market proponents, directs production to match demand. However, it’s not demand that is matched, because demand is not what is being measured by sales. Sales measure consumption, which is a small subset of actual demand. What they miss out on is demand from people who cannot afford it, and use of the good after the fact of consumption.

Ipso facto, measurable use/consumption (not markets) is a requirement for rational production, if the minimum standard of rational production is what markets accomplish. Markets (according to market proponents) measure consumption, but are not necessary to measure consumption. Consumption is measurable by ordinary means, and in fact must be done this way, even in markets. Without a measure of consumption in real, physical units, there really is no way to rationally direct production, because the prices of the inputs and outputs are in a continuous state of fluctuation. Because the practices and effects of the production of goods and services are rarely shared (and are frequently guarded dearly), consumers cannot reasonably be expected to be aware of them, let alone approve of them.

This places the responsibility of ethical decision-making squarely on the producers. Because producers initiate the productive process independent of all the wishes of consumers, the choices presented to consumers represent decisions made by producers, and thus the burden of behaving ethically begins and must be shouldered by the producers. Shifting this responsibility onto consumers is essentially victim-blaming; the choices producers can make are necessarily more numerous than the choices that consumers can make, which are limited to the set of decisions already made by producers.

How do we direct production outside of the framework of the market? First, we need to conceptualize the system of production outside the framework of the market. We can imagine the ecosystem of products available to us to be part of a graph (as in; products, as in consumer or end-use products, are leaves on the graph, each of which has a set of dependencies or inputs. The inputs are branches in the graph, and all products/leaves share a number of inputs/branches. The edges in the graph can be weighted by the proportion of each input into the output. The graph can be extended into a hypergraph to conceptualize the production processes which would include intermediary products and coproducts.

Costs can be measured directly using physical units, which is already a requirement for any rational production process. The prices of inputs to a product do not help measure the cost; the cost is the inputs themselves. Prices simply create a constraint on the cost, requiring the number of outputs to be constrained by the exchange values of the inputs. This constraint is alleged to represent the relative scarcity of the resource, but this is a claim which has flimsy support and dubious benefit. Relative scarcity could just as easily be measured using direct physical units, and prices have a considerable arbitrary element (if not being completely arbitrary) which does not lend much support to them being representative of scarcity.

Another problem markets are also supposed to solve is that of different choices having different potential values. According to the subjective value theory promoted by modern market proponents, value has no relation to any property of the thing being valued, and is entirely based on individuals’ judgments of it; this is supposed to resolve the paradox of something of greater utility being valued less than something of no utility by saying that prices are correct and our understanding of value is wrong (with the implication that prices are measurements of value).

I disagree with this—our intuitive understanding of value is right, and prices are wrong—why would water be more valuable than diamonds, when water is not just valuable for personal consumption, but is an essential component of all products or their production processes, and diamonds are just shiny pebbles with few practical uses? This applies not just to water as a whole, but additional units of water: Each additional unit of water provides the benefit of loosening the constraints of production, while diamonds tighten them.

On a side note, there is potentially an undiscovered paradox of value here: There is no rational motivation to produce anything but those products which widen the horizon of potential. In other words, why build diamond mines rather than power plants? Building a power plant results in not just the value of the output energy, but further value from products and processes that require energy as an input. If the most valuable choice is the most rational, then building power plants, factories, and so on is always the most rational choice.

How can we actually measure value according to how it is intuitively understood by most people? By considering the dependency tree of each product, we will see that in fact, a few things will show up as a component of every product or production process: Water, energy, and human effort. These are the most valuable resources we have (especially water, which is the reason that life exists on this planet at all). Things with high exchange values aren’t more valuable, they’re just scarce, or their sellers have high bargaining power.

By measuring how often each resource/good shows up in a dependency tree, we can see which goods are potentially the most valuable. By weighting the graph according to how much of each is actually consumed, we can relate this potential value with what people actually prefer. This causes inputs to be valued not just as products themselves, but as inputs to other products. Using a measure of centrality for each node (resource or product) in the graph, we can establish a deterministic conception of value that incorporates subjective preference, on the social level, including the relation of inputs to outputs. This conception of value is called Priority Theory of Value (PTV).

In the price system these properties are not fully realized, because according to market theorists, value is based entirely on individual subjective preference. Unfortunately, most individuals have no idea what the inputs of a product are, so people preferring products that make heavy use of, e.g. water as a component or process input does very little to change their perception of the value of water. All resources useful as inputs are thus undervalued because they are only valued as such by the producers themselves—who presumably value the products they make less than the buyers do or else they wouldn’t sell them.

Further, the dependency tree eliminates the obfuscation of the cost of a product: Since you have no idea not only what goes into a given product but what the producer paid for those inputs, producers can get away with e.g. using slave labor even though slavery is universally reviled. By directly examining it as the collection of inputs (and coproducts, if the dependency tree is extended into a hypergraph to show processes in full), the cost of the product is not some mysterious monetary monoid, but the matrix of the materials that make up the product and those associated with its production process.

Another function markets are supposed to fulfill is rationing, which it does by preventing people who are less willing (or less able) to pay for things from getting them. Rationing in this way, rather than on the basis of “what” rather than “for whom”, will lead to unethical outcomes (such as people who “contribute more” getting luxury goods while people who “don’t contribute” go without basic necessities). Because preference can only be measured after production, rationing must be done at the point of production.

Producers who accept these concepts should therefore adopt the blocking priority queue (BPQ) method of rationing. Before starting production, we need to coordinate what it is we’re producing so we don’t create shortages. Using a socially agreed-upon budget (which should be, but may not necessarily be, based on ecological replenishment rates with a safety stock margin), producers will submit their planned production to the queue, and on each tick of the production cycle, the queue will deprecate requests which are low-priority and would cause budget overruns. This takes care of not only the rationing problem but also a significant part of the information problem, as producers enter the dependency subtree of their product as part of the production process.

To understand this process more simply, consider the algorithm:

  1. Get the production requests for this production cycle.
  2. Get the current budget for this production cycle.
  3. Sort the requests by priority, then for each request:
    1. If the resources required to fulfill the request do not exceed the budget:
      1. Approve the request
      2. Subtract the required resources from the budget.
    2. Else reject the request
  4. Repeat 3-4 until the queue is empty.

The question of what to do about substitute resources should have an obvious answer in this context: If it’s necessary to substitute inputs, and you are producing a low-priority good, you are the one that should find a substitute. Fortunately, substitutes will be much easier to find with the abundant information provided by the dependency trees of other products–especially if this graph is augmented by abstraction, so we have not just measurements of products, but also generalizations or product classes (complete with multiple inheritance). Finding a substitute is then just a matter of going through the data and finding the class relevant to the problem that the product/resource to be substituted is solving.

For example, today solar panels are manufactured using ITO, which requires a very rare metal called Indium. The use of ITO is as a transparent electrode. If we were to look at the class of transparent electrodes, we would also see products such as silver nanowires and PEDOT:PSS. Silver is also fairly rare and is used in a lot of other things, but PEDOT:PSS is a plastic and could be made from recycled trash. If the properties of the latter are satisfactory, there is your substitute. If an adequate substitute cannot be found, the product requiring the resource to be substituted should be considered unviable.

Priority theory of value and blocking priority queues have strong potential as components of an anti-capitalist system of provision. Combined with existing alternative social systems and other components of the transferics ecology, PTV and BPQs will provide the capability to rationally direct production and provisioning without the risk that market-based solutions run of degenerating into capitalism. Though the implementations described here are obviously dependent on information technology, the concepts could be generalized for use in a lower-technology environment, as well.

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